PORT OF SEATTLE 
MEMORANDUM 
COMMISSION AGENDA               Item No.       6d 
ACTION ITEM             Date of Meeting    June 25, 2013 

DATE:    June 12, 2013 
TO:      Tay Yoshitani, Chief Executive Officer 
FROM:   James Schone, Director, Aviation Business Development 
James Jennings, Manager, Aviation Properties 
Wayne Grotheer, Director, Aviation Project Management Group 
SUBJECT:  United Services Organization Northwest Lease and Associated Second Floor 
Utilities Preparations (CIP #C800615) Authorization 

Amount of This Request:  $2,666,000  Source of Funds: Airport Development Fund 
Est. State and Local Taxes: $169,000   Est. Jobs Created: 41 
Est. Total Project Cost:    $2,666,000 
ACTION REQUESTED: 
Request Commission authorization for the Chief Executive Officer to (1) execute a lease,
substantially as drafted in the attached Exhibit 1, with the United Services Organization
Northwest (USO) for a term of ten years, with two five-year options, for operation of the Airport
service members' lounge located in the Main Terminal of the Seattle-Tacoma International
Airport; (2) complete design of the Second Floor Utilities Preparations project at Seattle-Tacoma
International Airport; (3) advertise and execute major construction contracts; and (4) utilize Port
crews. The total amount of this request is $2,666,000, which is also the total projected program
cost.
SYNOPSIS: 
The USO Center has been open at the Airport since 1968 and has the highest volume of USO
visitors of any airport in the country. It provides 24/7 travel assistance and "all the comforts of
home" to traveling servicemen and women and their families. There is not enough space in the
USO's current location to meet the current and future needs of USO patrons. 
Commission authorization is requested for staff to execute a long-term lease with the USO for a
new location on the second floor of the original 1947 Terminal Building at the Airport. The 10-
year lease will include two additional five-year options for the tenant to extend, for a total
potential period of 20 years. This lease requires the USO to make an investment of $1.2 million 
of their own capital funds for their tenant improvements, which is not included in the Port's costs

COMMISSION AGENDA 
Tay Yoshitani, Chief Executive Officer 
June 12, 2013 
Page 2 of 8 
for this project. This lease also commits the Port to spend approximately $1.271 million of the
requested $2.666 million capital project in the design and construction of a building envelope
and associated utilities and infrastructure for the new USO to be brought to its lease line. The
remaining $1.395 million project cost is largely to provide future utilities for the remaining
vacant second floor space. Relocating the USO from the south mezzanine level to this central
location will provide valuable office space for current and future airlines that is more proximate
to ticket counters and locates the USO in a larger space to accommodate its needs. At the advice
of counsel, this request seeks a single Commission authorization for design, advertisement and
execution of a major construction contract to demonstrate the Port's financial commitment in
executing the lease. 
This project was included in the 2013  2017 capital budget and plan of finance as an element of
the Mezzanine Tenant Relocation project, CIP C800560, a business plan prospective project with
a budget of $5 million.
BACKGROUND: 
The USO center has been open at the Airport since 1968 and currently serves 10,000 service
members, families, reservists and retired military a month. Continuing 45 years of service, the
USO center provides 24/7 travel assistance and access to all the comforts of home: hot meals,
snacks, a TV lounge to rest and relax, a shower, and free Internet access to service members of
all branches of the military and their families. With proximity to several military installations
(Joint Base Lewis-McChord, Puget Sound Naval Shipyards, Bangor Submarine Base, Everett
Naval Station and Whidbey Island Naval Air Station), the Airport is a vital corridor for service
members traveling to other duty stations around the world. There are unique characteristics of
the military community that travels through the Airport: 
Air Mobility Command (AMC) is the military's official air transport unit that coordinates
flights for duty station movements and relocations of active service members and their
families. AMC has regular flights every week to support these movements. 
Active service members are often on specific orders that require reporting to the Airport 
up to 24 hours in advance of their proposed flights. 
Duty station movements often include significant luggage, including large duffel bags,
household pets, and often family members' belongings. 
With the significant luggage and extended layover times, the amount of space required
for luggage storage is significant. 
These passengers spend much of their time waiting to be ticketed and, without the USO at the
Airport, would be forced to utilize the very limited amount of passenger circulation space presecurity
on the ticketing level. With the large number of military personnel and their families at
the Airport on a daily basis, for long lengths of time and with significant amounts of luggage,
their presence in the ticketing area would substantially increase terminal congestion.

COMMISSION AGENDA 
Tay Yoshitani, Chief Executive Officer 
June 12, 2013 
Page 3 of 8 
The current USO is 3,410 square feet and is located toward the south end of the mezzanine level
of the Airport, which is one level above the ticketing level (see Exhibit 2). The Port currently
has a month-to-month agreement with the USO for the lease of this space. 
In early 2012, the USO requested a long-term lease from the Port to assist in their capital fund
raising efforts and to enable the amortization of a potentially significant tenant improvement 
project. Their initial capital investment was intended to update and improve their current space
on the mezzanine level above ticketing, formerly used as the World Trade Center lounge. But
concurrent with their request, Port staff was working on developing the scope of the Mezzanine
Tenant Relocation project (approved by Commission on March 26, 2013). This plan was
developed to meet the increased demand for airline office space at the south end of the main
terminal building. So, in coordination with this planning effort, the Port proposed to move the
USO from their current mezzanine location to the second floor of the original 1947 Terminal
Building as part of this plan (see Exhibit 2). This move creates an additional 3,410 square feet of
office space available on the south end of the mezzanine level, which has already elicited
significant interest from one of our larger airline partners. Additionally, the increase in space
allocated to the new USO to 7,000 square feet will provide needed area for additional seating,
sleeping, showers, laundry, and luggage storage. 
In conjunction with the request to execute a lease with the USO, this request also seeks
authorization for design and construction funding for the previously recommended
improvements in the amount of $2.666 million (CIP #C800615). This project will create a shell
and utilities for the USO to construct their tenant improvements in the new space so that they can
vacate their current location, freeing up valuable space at the south end of the mezzanine level
that can be used by airlines for office space. The new USO location is in an area that doesn't
have as much proximity to airline operations. This project also includes adequate electrical,
mechanical and HVAC capacity for the remainder of the vacant second floor space (see
Exhibit 3). 
An essential element of an airline's operation at the Airport is office space located pre-security to
support the airline's ticketing functions. The proximity of this office space to the ticket counters
is highly important for operational efficiency. The Airport has limited pre-security office space
to support current and future airline needs. Aviation Business Development recently completed
a study of office space in the main terminal building. This study highlighted the scarcity of
suitable space. This project will create suitable office space for the USO, which will in turn free
up space that is in proximity to the ticket counters.
The capital portion of this lease was originally part of the Mezzanine Tenant Relocation Project
(CIP #C800560), with a total capital project budget of $5 million. Because of timing differences
and the complexity of the USO lease and tenant improvements, the project was split into two
separate projects in early 2013. The budgets of these two projects (Mezzanine Tenant
Relocation Project and the USO Second Floor Utilities Preparation projects) if recombined
would be less than the original $5 million budgeted in the 2013-2017 capital budget and plan of
finance.

COMMISSION AGENDA 
Tay Yoshitani, Chief Executive Officer 
June 12, 2013 
Page 4 of 8 
LEASE SUMMARY: 
Below is a comparison of the key business terms of the current lease and new, proposed lease.
The full version of the new, proposed lease is attached as Exhibit 1: 

Current Lease           Proposed 10-year lease 
Term              Month to Month         Ten years 
Extension              Not Applicable           Yes, Two, five-year options for
the tenant to extend 
Holdover              Not Applicable           Yes, Month-to-month 
Square Footage          3,410 square feet          ~7,000 square feet 
Rent                 None                 $10.00 per year 
Tenant Improvement      None                $1.2M 
Electric Utilities            No charge                 Pay $36.50/mo. (base electrical
rate) plus anything above agreed
upon max threshold to
incentivize conservation 
Other Utilities             No charge                No charge 

PROJECT JUSTIFICATION: 
With limited pre-security office space in the terminal to support current and future airline needs,
the current USO office space is better utilized as office space by current and possibly future
airlines at the Airport. In accordance with the Century Agenda goal to double the number of
international flights and as the Airport anticipates continuing strong international growth, Port
staff is working to relocate non-airline tenants to better accommodate pent up demand from
current airlines as well as accommodate the likely addition of new international carriers in the
not too distant future.
Additionally, with over 120,000 visitors to the Sea-Tac USO annually  the highest volume
airport USO in the United States  there is not enough space to accommodate the current and
future needs of the USO patrons. There is insufficient luggage storage space for frequent peak
times and excess luggage is currently stored outside the USO in temporarily unused office space.
Most notably, during peak times, service members and their families spill out onto the mezzanine
circulation corridor, causing congestion. 
There is approximately 17,500 square feet of currently unleasable space on the old second floor
of the 1947 Terminal Building that can accommodate the relocation of the USO. This new USO
would use approximately 7,000 square feet of this available space. This space is currently

COMMISSION AGENDA 
Tay Yoshitani, Chief Executive Officer 
June 12, 2013 
Page 5 of 8 
unleasable, primarily due to lack of basic utility infrastructure capacity including ventilation air 
and electrical power. This project will not only provide these utilities to the USO but also to the
remaining unleasable space, thereby rendering it usable for the future. Abatement in this area
will not be completed and there will be no architectural shell finishes as part of this project scope
in preparation for a future use or lease. This area is not considered desirable for the airlines
because of its location and access challenges, as well as the need for a significant capital
investment by the tenant. Therefore, with the USO's desire for a long-term lease, the
unavailability of additional space adjacent to their current mezzanine location, and willingness to
take on a significant tenant improvement project, the proposed lease and capital project request
resulted. 
Project Objectives: 
Partner with the USO to provide a long term place for the USO in the main terminal. 
Free up valuable mezzanine level space that can be used for airline offices that need to be
proximal to ticketing by moving the USO from their existing location. 
Provide adequate electrical, mechanical and HVAC utilities for the future build-out of the
remainder of the unoccupied and underserved second floor space. 
PROJECT SCOPE OF WORK AND SCHEDULE: 
Scope of Work: 
This project will provide adequate utilities (electrical, data/communications, mechanical
and HVAC capacity) for this entire uninhabitable vacant space of the second floor. 
Utilities will be brought to the second floor space. 
This project will construct shell walls for the USO so that they can construct a tenant
improvement (TI) of approximately 7,000 square feet and relocate from their existing
mezzanine level space.
This project will address building code egress issues for expected future office
occupancies for the second floor through design considerations of the egress pathways. 
Utility connections to serve the new USO TI will be located and agreed to by both the
Port and the USO. 
This project will abate regulated materials impacted by the USO Tenant Improvement 
construction only. 
Schedule: 
Commission Authorization                July       2013 
Begin Design                        July       2013 
Port abatement and building of shell demising wall July        2013 
USO Begin TI Construction               November   2013 
Advertise Construction Contract             December   2013 
Begin Construction                     March     2014 
Project Completion                     July       2014

COMMISSION AGENDA 
Tay Yoshitani, Chief Executive Officer 
June 12, 2013 
Page 6 of 8 
FINANCIAL IMPLICATIONS: 
Of the $2.666 million in costs forecasted for this project, 48%, or roughly $1.271 million has
been allocated to the USO relocation for the purposes of this financial analysis. Weighing that
cost against the revenue stream associated with a paying tenant in the space vacated by the USO,
the project's net present value over a 10- year period is slightly positive. 
Budget/Authorization Summary:             Capital     Expense      Total
Project 
Original Budget                       $2,545,000     $121,000  $2,666,000 
Previous Authorizations                        $0         $0        $0 
Current request for authorization             $2,545,000     $121,000  $2,666,000 
Total Authorizations, including this request      $2,545,000     $121,000  $2,666,000 
Remaining budget to be authorized                $0         $0        $0 
Total Estimated Project Cost              $2,545,000     $121,000  $2,666,000 
Project Cost Breakdown:                   This Request       Total Project 
Construction                              $1,781,000         $1,781,000 
Construction Management                     $268,000         $268,000 
Design                                  $178,000          $178,000 
Project Management                        $234,000         $234,000 
Permitting                                  $36,000           $36,000 
State & Local Taxes (estimated)                   $169,000          $169,000 
Total                                     $2,666,000         $2,666,000 

Financial Analysis and Summary: 
CIP Category             Revenue/Capacity Growth 
Project Type              Business Expansion 
Risk adjusted discount rate     7% 
Key risk factors             Low risk associated with releasing existing USO space 
Project cost for analysis        $2,660,000 
Business Unit (BU)          Aviation Business Development 
Effect on business performance  NOI after depreciation is expected to be positive 
IRR/NPV             For the $1,271,000 attributed to the USO, we have
calculated a positive NPV of $484,000 based on the
projected revenue stream of the space vacated on the
Mezzanine. For the remaining space there is no known
revenue stream. 
CPE Impact             Increase of less than $.01

COMMISSION AGENDA 
Tay Yoshitani, Chief Executive Officer 
June 12, 2013 
Page 7 of 8 
Budget Status and Source of Funds: 
As indicated above, this project was included in the 2013-2017 capital budget and plan of
finance as a business plan prospective project within the Mezzanine Tenant Relocation project 
CIP #C800560. The funding source will be the Airport Development Fund. 
Lifecycle Cost and Savings: 
The lifecycle cost and savings of this project will be determined and finalized as an element of
design. It is anticipated that opportunities for savings exist with the planned utilities installation
and systems to be installed as part of the tenant work. Annual Operating and Maintenance Costs
will increase due to increased use of space and utilities. 
STRATEGIC OBJECTIVES: 
This project promotes the Port's Century Agenda objective of meeting the region's air
transportation needs at Sea-Tac Airport for the next 25 years by adding capacity for office space
within the existing main terminal building. As the Port strives to develop new business and
serve 45 million passengers annually, including doubling the number of international flights, it is
important to provide office space near airline ticketing operations so the airlines can conduct
business efficiently. 
ENVIRONMENTAL SUSTAINABILITY: 
This project will examine in detail the following aspects during design: water use reductions,
including low flow fixtures, energy performance heating ventilating and air conditioning
equipment, potential for materials reuse and recycling, and factors to improve the indoor
environmental quality. Additionally, the lease will establish a financial structure to promote
electrical conservation. 
BUSINESS PLAN OBJECTIVES: 
This project supports the Aviation Division's strategic goal of operating a world class
international airport by anticipating and meeting the needs of our tenants, passengers, and the
region's economy. It facilitates better use of mezzanine office space by locating airline offices
closer to their operations and relocating current non-airline tenants to spaces more suitable for 
their needs. It also supports one of our important community partners, the USO, in enhancing its 
mission to provide an important service to these critical members of our community and their
families. 
TRIPLE BOTTOM LINE: 
The approval of this lease and the associated project supports economic development through
freeing up valuable airline leasable space at the Airport. Environmental sustainability principles
will be employed in the design and construction of both the Port and USO's tenant improvement
projects, as well as create financial incentives in the USO lease to incentivize conservation of
utilities. Also, the mission of the USO has a significant community benefit through providing
important support to these important service members and their families.

COMMISSION AGENDA 
Tay Yoshitani, Chief Executive Officer 
June 12, 2013 
Page 8 of 8 
ALTERNATIVES CONSIDERED AND THEIR IMPLICATIONS: 
Alternative 1  Do nothing - the current USO lease will continue indefinitely. The USO would
have to consider investment in the existing location without the necessary additional space to
meet their future needs. Existing airlines may not have office space available or in a location
that is necessary for an efficient airline operation. This is not the recommended alternative. 
Alternative 2  Authorize execution of a new lease with USO but require the USO to complete
necessary utility improvements and forego utility improvements in the remaining facility space. 
This alternative would put an excessive financial burden on the lessee, and require the USO to
construct improvements outside of its leased area, which is not consistent with Port policy. This
is not the recommended alternative. 
Alternative 3  Authorize execution of a new lease with the USO but not invest in the utility
improvements for remaining facility space. With the likely demand for this remaining space
likely to be needed in the near to mid-term future, making these utility improvements as part of a
future project, this alternative would increase construction costs as well as provide an additional
time barrier to the future use or lease. This is not the recommended alternative. 
Alternative 4  Authorize execution of a new lease with USO and invest in utility improvements
to the remaining facility space. This alternative will lead to a better customer experience,
increase our readiness for future space needs, and enhanced revenues due to a relocated and
upgraded service members' lounge facility. This is the recommended alternative. 
OTHER DOCUMENTS ASSOCIATED WITH THIS REQUEST: 
Exhibit 1  Proposed Draft Lease Agreement. 
Exhibit 2  USO Existing vs. Proposed Site 
Exhibit 3  Proposed USO Site vs. Remaining Vacant Space 
PREVIOUS COMMISSION ACTIONS OR BRIEFINGS: 
None